Author: VD

Statistical evidence of economic depression

Readers here are aware that I have staunchly maintained the U.S. economy has been in an economic depression since 2008. I have done so despite NBER declaring the “recession” over in 2009 and in the face of seven straight quarters of positive GDP growth statistics because I don’t believe that either the agencies or the statistics they report have much, if anything, to do with the observable economic reality.

To give one example, the U3 unemployment rate is presently reported at 9.1%. But this is a heavily massaged number which not only depends upon survey-based employment estimates, but upon the subsequent manipulation of the raw data. Since it’s not possible to radically alter the number of reported “employed” without looking as if they are blatantly manipulating the numbers, the BLS manages to keep the official unemployment rate artificially low by reducing the size of “the labor force”, chiefly through reducing “the participation rate”.

However, is it reasonable to believe that people are any less inherently willing to work in these difficult economic times than they were in the year 2000? I don’t see any justification for it. The suggestion that something is amiss can be seen when comparing the labor force participation rates with the employment population ratios (EPR) for 1973 and 2000 versus today. Given that the percentage of women participating in the labor force has methodically risen from 44.7% in 1973 to 59.2 in 2009, and that this increase has outpaced the exit of elderly men from the labor force since 1973, the current overall participation rate should be significantly higher than it was in 1973. But this is not the case, according to the BLS.

Dec 1973 Participation rate 61.2 EPR 58.2 U3 4.9
Jan 2000 Participation rate 67.3 EPR 64.7 U3 4.0
Jul 2011 Participation rate 63.9 EPR 58.1 U3 9.1

Now, if we simply compare the present number of reported employed to the present size of the civilian, non-imprisoned population, but calculate the labor force based on the 2000 participation rate, we get an unemployment rate that is 50 percent higher than the currently reported rate of 9.1%. Note that numbers given are in thousands as per the BLS.

239,671 Civilian non-imprisoned population x.673 participation rate equals

161,299 Labor Force minus
139,236 Employed equals
22,063 Unemployed

22,063 divided by 161,299 equals 0.13678

This means the current U3 unemployment rate according to the BLS metric should be 13.7%, not 9.1%. Note that this is higher than the “unemployment rates” reported in the first two years of the Great Depresion, 1930 (8.9%) and 1931 (13.0%). Please also note that the two historical “unemployment rates” are estimates made well after the fact as the BLS didn’t track unemployment statistics until 1948. Finally, one also must take into account that the current rate would be considerably higher were it not for the 2,868,000 more people that are now employed by the federal government than were employed in 1940, much less before the New Deal of 1933. Including these extra 2.8 million government workers in the unemployed list, as one must do in order to make a reasonable comparison between 2011 and 1930-31, indicates a comparable “unemployment rate” of at least 15.5%.

A second sign is the woeful state of the housing market. “A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s. And it took 19 years for prices to fully recover after the Depression.”

Of course, we can always apply Paul Krugman’s reasoning and launch an alien war to solve the economic problem. If we can simply arrange for 30 million people to be slaughtered by the aliens, that will reduce the labor force and lead to full employment overnight.

Next up, locusts

I think we can safely drop the idea that God has any particular affection for America now:

A 5.9 magnitude earthquake centered in Virginia forced evacuations of all the monuments in Washington and rattled nerves from the southern state of Georgia to Martha’s Vineyard, the Massachusetts island in the northeast where President Barack Obama is vacationing. No injuries were immediately reported.

And across the South, a single thought echoed throughout a million minds as if they were one. “Only 5.9? Come on!”

They CAN give America four As

S&P readies a belated upgrade to U.S. debt:

The ratings agency Standard & Poor’s said late on Monday that its president, Deven Sharma, who has become the public face of the firm in the wake of its historic downgrade on the United States’ long-term debt rating, will step down and leave the company by the end of the year. The decision by Mr. Sharma to resign comes as the ratings agency is under pressure from several fronts, including an inquiry by the Justice Department into its ratings of subprime mortgage securities and a push by activist investors to break up its parent company, McGraw-Hill….

His replacement, Mr. Peterson, 53, is currently the chief operating officer of Citibank, the banking unit of Citigroup.

I note that the one thing the New York Times does not assure us was that the management change was not the result of the recent downgrade of U.S. debt. No doubt Mr. Citibank already understands that an review of that decision and eventual restoration of AAA status is in the best interest of his continued employment.

Unless, of course, it is decided the time is right to debut the new, super-safe, guaranteed AAAA rating.

Neocons worry about future credibility

Or rather, the lack thereof. Didn’t anyone ever read them the tale of the boy who cried wolf?

In itself, the Libya intervention was “small.” Yet coming in the wake of two substantial wars that have stretched our military capacity to its limits, Libya felt to many like the straw that broke the camel’s back. Our military was skeptical about this war from the start. A palpable public shift of sentiment against interventions, even among conservatives, has been precipitated by an action in Libya that seemed only loosely tied to America’s security interests.

This is a shame, because the transformations in the Arab world are taking a decidedly dangerous direction. Quite possibly, we will someday face the need to intervene in situations in which our security really is under threat. Let’s hope the public hasn’t been so exhausted by then that it hesitates to support what must be done.

Translation: dammit, we’re not going to be able to sell America on invading Iran! Anybody around here speak Chinese?

Now that’s just CRAZY talk

Talk of Obama’s resignation is heating up:

Democrats will be looking at a massacre in the Senate, and that’s not even including already-endangered seats in Nebraska, Missouri, Montana, and New Mexico, which just elected its first Republican woman governor last year. Democrats could wind up losing enough seats to give Republicans a filibuster-proof majority in the Senate if Obama chases away the white working-class vote that he’s been alienating for the past two years on ObamaCare and now his disastrous economic performance. If unemployment starts rising and growth remains low in the next few months, Democrats may insist on Obama finding a graceful exit before the primaries.

And guess who that leaves with an open path to the Democratic nomination? Hillary Clinton. She can step into the void with promises to return America to the economic policies of her husband. The Left may not have much love for Hillary any longer, but she was winning the very working-class Democrats in the 2008 primaries that Obama is losing to the Republicans now. States like Pennsylvania and Michigan would snap back into place for Democrats, and perhaps Wisconsin as well. Having Obama off the top of the ticket would take some of the downward pressure off of some other Senate races, and Hillary would likely be a plus in most.

If Hillary took Obama’s place in 2012, Republicans would face a much tougher electoral map. They would still have the advantage of running against Obama’s record, but the GOP may not capture that disaffected Democratic working-class vote if Hillary also ran against Obamanomics and promised a return to Clintonian prosperity.

That prediction from last summer isn’t looking quite so wildly insane now, is it…. Of course, if I do turn out to be correct, the only logical explanation will be that I have a Five-Pound Brain.

WND column

The Summer of our Discontent

This has been a most peculiar summer. In the U.S. it has been blazing hot, while across Europe the weather has been unseasonably cool. Despite an increasing number of momentary flashes of societal breakdown, from Athens and London to Philadelphia and Vancouver, the social mood has been relatively calm. In fact, it has been almost too calm, as if the usual instigators of unrest are concerned that creating the usual sparks might set off a conflagration that would threaten to engulf them as well.

The markets are in a precarious state, too. The Dow is behaving erratically, with giant movements both upward and downward, but predominantly down, in much the same way that it was behaving in the bear market that ran from October 2007 to March 2009. That downward slide took more than 50 percent off the Dow, and a repetition of similar magnitude would be expected to bottom around 5,000. Should that happen, we can reasonably anticipate that gold, which has risen from $320 in 2002 to $1,850, will be approaching the 1:1 ratio that Robert Prechter predicted back when the ratio was 50:1.

Supply, Demand, and the Interest Rate

I swear, Neo-Keynesians must never look at debt statistics. I mean, they literally NEVER seem to look at them! Our favorite Nobel Prize-winner comments on what is supposed to be the mysterious failure of interest rates to rise in line with the massive expansion of government debt since 2008 and erroneously concludes that this proves his belief in unicornsthe ability of government to borrow indefinitely without affecting interest rates:

I mean, common sense — or at least common sense as the WSJ sees it — would tell you that massive government borrowing would send interest rates soaring. And that’s certainly what the WSJ editorial page told its readers would happen. Only us fancy-schmancy Keynesians said otherwise; and here’s what actually happened:

Yes, interest rates have declined from 4.7% in 2007 to 2.3% in 2011 even as government borrowing has almost doubled, but what Krugman fails to point out is that the neo-classicals at the WSJ were assuming, incorrectly, that the private demand for debt, (a 12x larger factor), would continue to increase, and therefore increased government borrowing added on top of that would cause overall debt to expand in excess of its average annual post-WWII rate of 8.7%. This OVERALL increase in demand for debt would increase the price of debt, thereby causing interest rates to rise. All very sensible and perfectly in line with both post-war economic history and basic economic theory alike.

However, what the WSJ failed to anticipate was that despite the 82.9% increase in government borrowing since 2008, total debt outstanding only grew 4.8% in 2008 and actually SHRANK 0.32% in 2009 and 0.87% in 2010. That’s not a liquidity trap, that’s a 22.5% demand gap between the overall amount of debt anticipated and the actual amount borrowed!

Even an Econ 101 student knows what happens to price when supply goes up and demand goes down. The price goes down. Interest rates are at historic lows for the obvious reason that OVERALL demand for debt, relative to GDP, is at historic lows as well, even though the federal government sector has increased rapidly. The WSJ made what at the time appeared to be a safe and perfectly reasonable assumption, given that between 1946 and 2007, there had never been a single year in which overall debt grew less than 4%. Their assumption also happened to be absolutely wrong, but the incorrect nature of that assumption does not mean that Krugman and his fancy-schmancy Keynesian-imagined exception to the law of supply and demand is therefore correct.

Conan the Torturer

The intrepid Leo Grin isn’t what one would call delighted with the new Conan movie:

Saw Conan the Barbarian last night. Revoltingly stupid, incomprehensibly plotted and edited, and overflowing with the kind of quasi-erotic torture porn (seemingly pulled wholesale out of a serial killer’s wet dreams) that’s become a staple of both fantasy literature and Hollywood films this century. Easily one of the worst films I’ve seen during decades of painfully slumming through mediocre genre fare — I daresay even Uwe Boll (the ham-fisted director commonly seen as the modern era’s answer to Ed Wood) has never made anything this irredeemably rotten.

I daresay we can soon expect to hear from the admirers of the New Epic Nihilism informing us that Leo has once again managed to miss the point, that the new Conan the Barbarian film is, in fact, a brilliant reinvention of a genre that had grown tired and stale, that it is admirably adult in its moral ambiguity and creative depravity, and may be the greatest film since Citizen Kane. Which leads me to contemplate two things. First, since when did “adult” come to imply torture, incest, and rape? I mean, I enjoy spending a quiet Saturday night creeping about the bushes at the local university armed with chloroform and a knife in search of a new friend to bring back to my soundproofed playroom as much as anyone, but sometimes one would like a little escapism in one’s fantasy entertainment. You know, just a simple quest to find the Macguffin, defeat the Foozle, and save the world or something would be nice.

Read the rest at the Black Gate.

I also thought Sean Stiennon’s recent post on Elf Opera in Tang China was worth reading. He highlights the same problem with current fantasy fiction, albeit from a different perspective, that I first addressed in my essay published in BenBella’s Reinventing Narnia.

Mailvox: the Muslim myth

The aptly named Sub Specie has fallen for a common legend believed by many of the half-educated and historically illiterate:

“If it weren’t for the goddamn Muslims, we wouldn’t have great ancient literature!!! They preserved it for us, you know. Oh, fcuk, no, you didn’t know…did you? Not only did they preserve all that s#it, but they contributed so much to math, medicine and science (ironically while Europe was a chaotic s#ithole full of rotting bodies).”

It’s always interesting to receive what apparently is intended as a history lesson from someone who quite clearly knows nothing of the Eastern Roman Empire. The idea of “the Arab transmission of the classics” is false, as should be readily apparent to those who are aware that most of the ancient works lost to the West were “discovered” in conquered Spain, not the Middle East. Moreover, it is obvious that the Muslims did not contribute much of their own in the interim period when they possessed the Greek classics and the post-imperial Latins did not.

“The Arab transmission of the classics is a common and persistent myth that Arabic commentators such as Avicenna and Averroes ‘saved’ the work of Aristotle and other Greek philosophers from destruction. According to the myth, these works would otherwise have perished in the long European dark age between fifth and the tenth centuries, had the Islamic philosophers not preserved them by translating them into Arabic, to be passed on to the Latin philosophers in the West after the reconquest of Spain from the Muslims during the twelve and thirteenth centuries. This is incorrect. It was actually the Byzantines in the East who saved the ancient learning of the Greeks in the original language, and the first Latin texts to be used were translation from the Greek, in the 12th century, rather than, in most cases, the Arabic, which were only used in default of these. “